Ontario regulators say blockchain use may require approval

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TORONTO (Reuters) - The Ontario Securities Commission, Canada’s largest securities regulator, said on Wednesday companies using blockchain technology in their financial services may need to register or file a prospectus or meet other regulatory requirements.

The OSC made the announcement in a notice that followed a white paper on Monday addressing the role new technology like blockchain will have on innovation in the industry.

It asked companies operating or planning a blockchain-based product or service to contact LaunchPad, the regulator’s “sandbox” initiative that helps fintechs plan around compliance requirements.

Financial technology, or fintech, has transformed the banking industry in recent years by using new technology to provide more accessible, efficient, and often cheaper financial services.

Some fintech startups unfamiliar with complex securities regulations may run into compliance issues, as was the case last year with Toronto-based Lending Loop, which had to temporarily pause its unlicensed operations. The company resumed operations after receiving an exempt market dealer license.

Blockchain, or distributed ledger technology, is a decentralized database considered very difficult to hack and is the code that underpins bitcoin. The technology can be used in trading, clearing and settling securities, and tracking ownership of securities.